Business versus software requirements

Business requirements

Business requirements describe WHAT the software must do to generate value for the buyer. For example:

• The software should be able to combine purchase orders from multiple locations to get volume discounts and reduce costs.

• The software must be able to detect and prevent duplicate payments of invoices.

Business requirements are used to select and buy the software.

Software requirements

Software requirements describe HOW the software will work. For example:

• How the chart of accounts will be configured to roll up information.

• How approvals workflows will be executed.

• How business processes will run, e.g., converting a sales order to a manufacturing order and then producing the goods.

From one perspective, a business is a collection of business processes that deliver specific outputs. Software requirements are used during implementation to configure the system to execute those processes to deliver the desired process outputs. (Note that software requirements are also used when coding software, but that is an entirely different situation.)

Why it matters

It is only worth a company building software if that software will provide a significant business advantage. Otherwise, software should be bought because, in the long run, it will cost far less. That is why a company like Netflix built the website you see when selecting and watching movies but bought software to manage things like HR and procurement.

Anybody who claims it is cheaper to build software rather than buying it is demonstrating a technical perspective rather than a business perspective. They are more interested in working with technology than meeting real business needs.

When you buy enterprise software, you are interested in WHAT the software can do. You really don’t care HOW it does it, as long as it meets your business requirements. That is why buying enterprise software like ERP is a business decision rather than an IT decision.